The influence of twinning on the strain hardening rate and fracture mechanism in AZ31B magnesium alloy was studied in this work by in situ microstructural analysis during tensile testing in a chamber of scanning electron microscope. Three types of samples used in this study were obtained by (1) extrusion (as-supplied), (2) I-ECAP and (3) I-ECAP followed by side upsetting. Microstructures, textures and mechanical properties were examined after each processing step. An analytical equation was used to describe flow stress curves of the samples which exhibited various modes of deformation (1) only by slip, (2) dominated by tensile twinning followed by slip and (3) dominated by contraction twinning followed by slip. It was shown that tensile twinning increases strain hardening rate, while the opposite is observed for contraction twinning. The effective Schmid factors for slip in volumes deformed by tensile and contraction twinning were determined in this work using modelling approach as 0.215 and 0.45, respectively. Contraction twinning was also revealed to be responsible for an earlier fracture of the extruded sample subjected to tension, since microcracking was shown explicitly to be initiated within twins.